It’s fun to talk about non-fungible tokens, or NFTs, as they are the perfect example of how the impact of blockchain technology in people’s lives goes far beyond the financial market. As we can see in the hundreds of headlines over the past few months, they have grabbed the attention of the world because they are a new way of interacting with culture, music, sports and media.
This article will explain what NFTs are, how they work, how the NFT boom started, and why blockchain technology has made it possible for NFTs to create a new economy.
Why is there so much excitement about NFTs?
NFT is such an exciting and fun topic to talk about because almost everyone loves music, art, sports and the internet. The feeds of every social media platform are filled with people who have shown no prior interest in crypto assets or decentralized finance, eagerly talking about unregistered tokens. In the first half of 2021, we saw many celebrities and memes supporting NFTs.
Jack Dorsey, CEO of Twitter, NFT. sold your first tweet as for an incredible amount of over $2.9 million last March. Edward Snowden’s NFT was a portrait of Snowden himself sold about $5.4 million or 2,224 ether (ETH)
The NFT of the Zoe Roth meme, known as “Disaster Girl”, was on fire in the background since 2005 (and beyond) because of the meme of her malicious smile while looking at the camera. sold As NFT for 180 ETH, equivalent to approximately $500,000.
Furthermore, companies from the traditional market have decided to surf the NFT wave. For example, in Brazil, the first collection in Havaianas’ NFT was Auction closed last month.
NFT transaction volume has multiplied by more than 25 since December 2020, as NFTs are in people’s daily routine and life. It could be one of your favorite songs, a cartoon of your favorite superhero, or a tool in a game that your kids want to acquire. In the following chart, we can clearly see the increase in NFT transactions over the past six months, as well as trading volume since the end of Q3. before the recent pop.
What are NFTs? How does that work?
We can conceptualize an NFT as a piece of software code that verifies the assets of a non-fungible digital asset, or a digital representation of a physical non-fungible asset in a digital medium. For those who I like it More technical approach:
“NFTs are a pattern of smart contracts that provide a standardized way to verify who owns an NFT, and a standardized way to ‘transfer’ immutable digital assets.”
In this case, any non-fungible asset can be the object of NFTs, be it domain names, tickets to an event, digital coins in games, and even identifiers in social networks such as Twitter or Facebook. . All those non-fungible digital assets can be NFTs.
NFTs consist of a data structure (token) that links metadata files that can be fixed to an image or file. That token is moved and modified to accommodate the needs of blockchain networks such as Ethereum, Kusama and Flow. The art file is uploaded to a blockchain network which creates a metadata file in the token’s data structure.
As a content creator, such as digital artist beeple or rock band kings of leon, you upload your art file to a platform that takes the metadata of your file and passes it through the entire back-end process of the product, otherwise called your NFT.
Your NFT then receives a cryptographic hash (a key) – a tamper-proof register with a date and time stamp made on the blockchain network. Adhering to valuable data and seeing that it was not modified at a later date is a must for any artist.
Loading your art on-chain can give you a better perspective on when the art file’s metadata was tokenized. Since the data for the piece of art is uploaded, no one can recover or delete it, and the chances of your artwork disappearing if your NFT is registered on the blockchain are practically non-existent.
How has blockchain technology increased the possibilities of NFTs?
As of 2008, traditional NFTs did not have a unified representation in the digital world. As a result, they were not standardized, and NFT markets were closed and limited to platforms that issued and created a prescribed NFT.
The first NFT in the blockchain started with the arrival of? colored coins on bitcoin’s blockchain. Although originally designed to enable bitcoin (B T c) transactions, their script language stores a small amount of metadata on the blockchain, which can be used to represent asset management instructions.
On the other hand, the first NFT experiment based on the Ethereum blockchain was Cryptopunks created by Larva Labs, which consisted of 10,000 collectible, “unique” punks. The fact that rogues “live” on the Ethereum network has made them interoperable with digital markets and wallets.
NFTs went mainstream in 2017 with the cryptocurrency on the Ethereum blockchain, allowing users to Create and breed digital cats with different pedigrees. It was a pioneering project to create a sophisticated system of incentives, determining that NFTs could be used as a promotional tool. This increased interest in auction contracts, which have recently become one of the primary mechanisms for pricing and buying NFTs.
The exciting part of implementing blockchain technology in NFTs is that it greatly expands their advantages and possibilities. It has brought to the fore the standardization of digital, non-fungible asset representation through the ERC-721 standard. Similar to the ERC-115 and ERC-998 standards, ERC-721 is a pattern of smart contracts on the Ethereum blockchain that brings a standardized way of verifying who owns the NFT, and a standardized method of “moving” non-fungible digital assets. way.
It is worth mentioning that although Ethereum is where most of the action currently takes place, many NFT patterns are emerging on other blockchains. For example, dGoods, created by Mythical Games, is focused on implementing a cross-chain standard using the EOS blockchain. In addition, TRON’s first NFT standard, TRC-721, was officially announced at the end of December 2020. The introduction of this standard is expected to help the Chinese-focused blockchain use various distributed ledger technology-based apps and keep up with Ethereum’s momentum. Increasing NFT field.
Since then, an NFT registered on the blockchain has become a truly “unique” asset that cannot be counterfeited, tampered with or spoofed.
What are the main benefits of Blockchain NFTs?
As mentioned above, the first advantage of NFTs backed by blockchain technology is standardization. In addition to standardizing the primary features of NFTs – such as assets, transfers and access control – blockchain technology allows NFTs to include additional features, such as how to obtain NFTs, for example. Other benefits include interoperability, marketability, liquidity, immutability, proven scalability, and programmability. We will explain each one by one.
nft make pattern interoperability This is possible so that NFTs can move more easily between multiple ecosystems. In a new project, non-fungible tokens can be seen instantly across dozens of different wallet providers, negotiable in multiple markets and with the potential to be acquired in multiple virtual worlds. This interoperability is only possible due to open patterns allowed by blockchain technology that provide a clear, consistent, reliable application programming interface, and with authorization to read and record data.
Interoperability, in turn, has increased ability to sell of NFTs by enabling free trading in the open markets. Blockchain-based NFTs allow users to transfer their non-fungible assets outside of their native environment. They also have the advantage of sophisticated negotiation resources, such as auctions and bids, as well as the ability to transact in any currency, from cryptocurrencies such as bitcoin and ether to stablecoins and specific digital currencies from a specified application.
Blockchain-based NFTs bring more immediate marketability liquidity Markets that can serve a greater variety of publics enable significant exposure to irreplaceable assets to a broader group of buyers.
The fifth and sixth benefits of using blockchain technology in NFTs immovable position and proven deficiency. This is because smart contracts allow developers to set severe limits on the supply of NFTs and enforce long-lasting assets that cannot be modified after the token is issued. Therefore, one can guarantee that the specific properties of NFTs will not change over time, as they are codified in the blockchain. This is particularly interesting for the physical art market which relies on the proven scarcity of an original piece.
An interesting trajectory in this new NFT world based on blockchain appeared due to recent trends and new markets, such as programmable art – which allows collectors to intervene in the original design of art.
In the market of NFT-represented art, immutability and scarcity are essential. In the digital art market, the benefits of programming Might be something to consider. We can find examples of programmability in Async Art, a platform for interacting and creating NFTs that enables owners to change their images whenever they want. Another example of a programmability feature is the ability of a song to change its composition. This means the music may sound different every time you listen to it. These two examples are made possible by dividing a piece into separate layers called stems. Each stem has a variety to choose from for its new owner. This way, a single track in Async Music can contain many unique combinations of sounds.
Many people have yet to understand the dimension of the NFT boom and how blockchain is revolutionizing the way we consume art. Perhaps the topic deserves a more in-depth conversation.
However, one of the NFTs is the programmability of smart contracts on the blockchain, which always guarantees a reward for content creators negotiating their work.
Let’s say a specified amount of content (music, art, domain name, picture of a target from Pele, etc.) is transacted hundreds of times. In that case, the content creator is going to receive a commission.
This could completely change the dynamics of copyright and intellectual property because if “division of income” is programmed into the code of NTF’s smart contracts, content creators no longer need to worry about the legal assets of their artwork. Won’t happen.
In fact, the non-fungible token and blockchain technology markets still need to embark on a long journey to solve the scalability, marketing infrastructure and applicable jurisdiction in NFTs with decentralized storage. Nevertheless, we will not miss out on the possibility of codifying the rights to digital assets set behind NFT transactions. This enables the appearance of new businesses and new markets governed not only by institutions or traditional validators of trust, but also by those who create appreciated content in social and productive centers.
The views, opinions and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Tatiana Revoredo He is a founding member of the Oxford Blockchain Foundation and a Blockchain Strategist at the Said Business School at the University of Oxford. Additionally, he is an expert in blockchain business applications at the Massachusetts Institute of Technology and is the Chief Strategy Officer of Global Strategy. Tatiana has been invited by the European Parliament to the Intercontinental Blockchain Conference and was invited to a public hearing by the Brazilian Parliament on Bill 2303/2015. She is the author of two books: Blockchain: Tudo O Que Voc V Precisa Saber Sab and Cryptocurrencies in the International Scenario: What is the position of central banks, governments and authorities on cryptocurrencies